IPO RAISING AND

SME LISTING

IPO CRITERIA
1.PAID UP CAPITAL
According to the eligibility requirements, it is necessary that the
company has a paid-up capital of at least 10 crores.
In addition to this, it is also necessary that the capitalisation (Issue Price
* No. of equity shares post issue) of the company should not be less
than 25 crores.

2.IPO OFFERING
If the post IPO equity share at least 25% of each class of
capital is less than Rs. 1600 equity shares must be
crore offered.

If the post IPO equity share a percentage of equity shares

capital is more than Rs. 1600 equivalent to Rs. 400 crore rupees
crore but less than Rs. 4000 crore must be offered.

If the post IPO equity share

at least 10 percent of each class
capital is more than Rs. 4000
of equity shares must be offered.
crore

Companies that do not meet (a) and satisfy (b) and (c) are required to increase the
public shareholding to at least 25% within 3 years of the securities being listed on the
exchange.
3. FINANCIAL CRITERIA
A SEBI has stipulated the rules/guidelines for the companies who are planning to
raise an IPO for funding

Net Worth 1 Crore every year, for last 3 years

15 crore for every year for last 3
Pre-Tax Operating profit preceding years

Tangible Assets 3 Crore in each year for the last 3

preceding years

If the company has changed its name in the last one year it must have earned at least 50% of
the revenue for the preceding full year from the activity indicated by the new name;
The existing paid-up share capital of the company must be fully paid or forfeited. This means
that the company looking for an IPO should not have partly paid-up shares as a part of its
equity.

4.PROMOTERS CRITERIA
The next set of requirements are pertaining to the promoters, directors, selling
shareholders of the company.
Promoters here are people who have experience of a minimum of 3 years in
the same line of business.
In order to be considered a promoter, they also have to hold at least 20% of
the post IPO equity share. This 20% can be held either individually or
severally.
It is necessary that these promoters/directors/selling shareholders (henceforth
individuals)
Do not have any disciplinary action taken against them by the SEBI. i.e. they should
not have been debarred from accessing the markets. If the period of debarment is
already over at the time of filing a draft offer prior to IPO then this restriction is not
applicable.
If these individuals were prior to the IPO also promoters/ directors of another
company that is debarred from accessing the markets then the company cannot
go ahead with the IPO with them as promoters/ directors. But if the period of
debarment is already over for the other company at the time of filing a draft offer
prior to IPO then this restriction is not applicable.
If these individuals have been classified as wilful defaulters by any bank or
financial institution or consortium then the company can not go ahead with the
IPO with them as promoters/ directors. [A wilful defaulter is one who has not met
repayment obligations like loans to these banks, financial institutions, etc.]
It is necessary that none of the promoters/ directors have been categorised as a
fugitive economic offender under the Fugitive Economic Offenders Act 2018.
 Statutory Lock-in
After the IPO the post-IPO paid-up capital of the
promoters is subject to a one-year lock-in period.
After one year at least 20% of post-IPO paid-up
capital must be locked in for at least 3 years (Since
the IPO).
This, however, is not applicable to venture capital
funds or alternative investment funds (category I or
category II) or a foreign venture capital investor that
has invested in the company.
If the post IPO shareholding is less than 20
percent, alternate investment funds, foreign venture
capital investors, scheduled commercial banks,
public financial institutions, or IRDAI registered
insurance companies may contribute for the
purpose of meeting the shortfall.
This contribution, however, is subject to a maximum
of 10% post issue paid-up capital. This 20%
statutory lock-in is not applicable if the issuer
does not have any identifiable promoters.

Other Factors that SEBI considers for IPO verification

1. The ultimate promoters are unidentifiable;

2. the purpose for which the funds are being raised is
vague;
3. The business model of the issuer is exaggerated,
complex, or misleading, and the investors may be unable
to assess risks associated with such business models;
4. There is a sudden spurt in business before the filing of
the draft offer document and replies to the clarification
sought are not satisfactory; or
5. Outstanding litigation that is so major that the issuer’s
survival is dependent on the outcome of the pending
litigation.
Hire an Investment
Steps in Launching
Banker an IPO
The Draft Prospect must be sent to
the SEBI at least a 30 day prior. The
Draft prospect is only made when the
Submit Draft Company wants to raise more than 50
lakh Rupees if they don’t want to
Prospectus to SEBI raise more than 50 lakh they don’t
need to prepare a draft prospectus.
When Draft Prospectus is submitted
to the SEBI, Then SEBI will check all
the details and give Suggestions to
Listing Application to change within 30 days.

Stock Exchange

Road Show
Promotion of IPO

In Fixed Price Offer companies offer a

fixed price of share like 1000 share at
Share Price par rate of When the company didn’t
want to offer the price at a fixed price
they can offer a band of minimum and
maximum bid price.

Launching IPO
 SME LISTING REQUIREMENTS
KEY SEBI Norms for SME Listing

Eligibility Norms for Listing at SME Platform

SEBI, the market regulator came up with the guidelines for SME companies
to get listed on the exchange. Below are the key requirements and
eligibility norms for SME Listing in India.

Eligibility Criteria BSE SME Requirement NSE Emerging Requirement

Minimum: Rs 3 Cr
Post Issue Maximum Rs 25 cr
Maximum: Rs 25 Cr
Capital
Net Tangible Assets: Rs 3 Cr
Track record of at least
Net Worth: Rs 3 Cr (Rs 15 Cr
three years
for broking companies)
The company should have
Track Record Distributable profits for at
positive cash accruals
least 2 years out of
(EBDT) from operations for
preceding 3 completed FYs
at least 2 financial years
or Net worth shall be at least
preceding the application
Rs 5 Cr. Profit before tax of
and its net-worth should
Rs 5 Cr for broking
be positive
companies
 Mandatory facilitation of
trading in Demat securities
Certificate that no winding
petition or reference to BIFR
Other
Mandatory corporate
Requirement
website
Promoters to attend to
interview with Listing
Advisory Committee
No change in promoter in
preceding 1 year
The Company has not been
referred to Board for Industrial
and Financial Reconstruction
(BIFR).
No petition for winding up is
admitted by a Court of
competent jurisdiction against
the Applicant Company.
No material regulatory or
disciplinary action by a stock
exchange or regulatory
authority in the past three years
against the applicant.

SME to Main Board Migration Criteria

Following are the criteria's for migration for moving SME to Main Board:
The company should be listed on SME Platform for at least 2 years
Rs 10 Cr paid up capital
< 500 shareholders - T to T group
Approval from 2/3 of non-promoters shareholders

Process for SME Listing

1. Conversion of Company into Public Limited Company, if applicable X
2. Preparation of Documents for conversion and submission to the Registrar of
Companies (RoC) for approval. Documents includes Alteration of Memorandum,
Articles & filing of necessary forms for appointment of aforesaid directors. X+7
3. ROC approval for conversion (X+9)
4. Identification & appointment of Registrar and Transfer Agents (RTA or R&T Agent).
Submission of Master Creation forms with NSDL, CDSL for establishing
connectivity. X+11
5. Appointment of Managing Director, Whole Time Director, Independent Directors,
Company Secretary. Deciding about their pay, sitting fees etc. (X+14)
6.Constitution of committees including Audit, Shareholder Grievance and
Payments.(X+17)
7.Preparation of website of the Company & hosting code of conduct on the website
(X+21)
8.The signing of Tri-Partite Agreement with NSDL & CDSL and receipt of ISIN (X+24)
9. Identification & appointment the peer review auditors. Get the financials of last 5
years restated and for last 1 year re-audited from peer review auditors. X+26
10. Appointment of Merchant Banker & Market Maker X+29
11. Preparation of Project Report and Draft Red Herring Prospectus (DRHP) X+33
12. Filing of Draft Red Herring Prospectus (DRHP) with stock exchange along with an
application for in-principle X+38
13. Clearance from stock exchangeX+75
14. Filing of Prospectus with ROC & getting it cleared from ROC. X+80
15. Filing of Final Prospectus with Stock exchange and SEBIX+87
16. Opening of the IssueX+90
17. Closing of the IssueX+93
18. Finalisation of Basis of Allotment by RTA & submit to the Stock exchangeX+96
Documents Required
Draft offer document
Copy of the Prospectus
Copy of resolution passed by the Board of Directors
Copy of the shareholders resolution passed under 62(1)(c) of
Companies Act, 2013
Certificate from either of the following:the Managing Director /
Company Secretary or PCS / Statutory or Independent Auditors
Copy of all show cause notice/orders issued
PAN & TAN of the Company.
DIN & PAN of Promoters and Directors.
Balance Sheets, P&L Statements and Cash Flow Statements for the
last 5 years (or for such applicable periods)
Copies of major orders or contracts
Details if the present or any previous application of the
Company/Group Company for listing of any securities has been
rejected earlier by SEBI or by any stock exchange and reasons also.
Name of the exchange which is proposed to be designated Exchange
for the issue.
Copies of agreements and memoranda of understanding between
the Company and its promoters/ directors.
Articles & Memorandum of Association of the Company.
A certificate issued by the statutory auditor/practicing chartered
accountant
Association, if any, of the directors/ promoters of the Company with
any public or rights issue made during last 10 years.

THE END